At market equilibrium,
A) demand equals supply.
B) quantity demanded equals quantity supplied.
C) surpluses are greater than shortages.
D) shortages are greater than surpluses.
According to new growth theory,
A) physical capital is nonexcludable.
B) knowledge capital is excludable.
C) knowledge capital is subject to increasing returns.
D) knowledge capital is rival and excludable.
If a U.S. firm produces cars in Mexico, that production should count towards
A) U.S. GNP.
B) Mexico’s GNP.
C) U.S. GDP.
D) It will not affect either U.S. GNP or U.S. GDP.
The size of the underground economy would tend to increase if the government of a
country
A) decreased government regulations on businesses.
B) increased income tax rates.
C) legalized prostitution.
D) legalized marijuana.
There is a strong link between changes in the money supply and inflation
A) in both the short run and the long run.
B) in neither the short run nor the long run.
C) in the short run, but not in the long run.
D) in the long run, but not in the short run.
In July, market analysts predict that the price of gold will rise in August. What happens
in the gold market in July, holding everything else constant?
A) The supply curve shifts to the right.
B) The supply curve shifts to the left.
C) The quantity demanded and the quantity supplied of gold increase.
D) The demand curve shifts to the left.
The sum of the marginal propensity to consume and the marginal propensity to save is
always equal to
A) zero
B) 0.5
C) 1
D) 100
If the purchasing power of a dollar is greater than the purchasing power of the yen,
purchasing power parity would predict that
A) in the short run, exchange rates will move to equalize the purchasing power of the
dollar and the yen.
B) in the long run, exchange rates will move to equalize the purchasing power of the
dollar and the yen.
C) in the long run, interest rates will move to equalize the purchasing power of the
dollar and the yen.
D) in the short run, interest rates will move to equalize the purchasing power of the
dollar and the yen.
Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is
2 percent, the current inflation rate is 4 percent, and real GDP is 2 percent above
potential real GDP. If the weights for the inflation gap and the output gap are both 1/2,
then according to the Taylor rule the federal funds target rate equals
A) 4 percent.
B) 6 percent.
C) 8 percent.
D) 10 percent.
We say that the economy is at full employment if the unemployment rate is equal to
A) zero.
B) the natural rate of unemployment.
C) the amount of cyclical unemployment.
D) the sum of frictional and cyclical unemployment.
E) the sum of structural and cyclical unemployment.